Stimulus Update: An Important Inflation Update Comes Out This Week

It's information you'll want to look out for.

There's a reason so many consumers have been calling for stimulus checks this year. Inflation has been making it very difficult to keep up with standard living costs, and many people feel they need a lifeline to avoid depleting their savings and racking up scores of credit card debt just to stay afloat.

Meanwhile, the Federal Reserve has been hiking up interest rates in an attempt to slow the pace of inflation. And while its intentions in doing so are good, it's put a burden on consumers who have landed in a position where they need to borrow money in the form of credit card balances to keep up with their basic expenses.

Later this week, we should get a critical inflation reading that could determine whether the Fed pulls back on aggressive interest rate hikes or keeps moving forward with them. And it's a big announcement you won't want to miss.

Will inflation readings be lower for September?

In August, the rate of inflation notched upward slightly compared to July, and that sent the stock market reeling. It also prompted the Fed to implement another 0.75% interest rate hike during its most recent meeting.

On Oct. 13, we can expect September data from the Consumer Price Index (CPI) to be released. That index measures changes in the cost of consumer goods.

If the CPI shows an uptick in inflation for September, there's a good chance the Fed will respond with yet another aggressive rate hike. And that could make life even more difficult for cash-strapped consumers who are being forced to rely on credit cards these days.

On the other hand, if the CPI shows that inflation levels were lower in September than in August, the Fed may not feel compelled to implement as harsh a rate hike during its next meeting. And that could give borrowers a bit of relief.

Could aggressive interest rate hikes spur a recession?

That's the fear among consumers and financial experts alike. When borrowing becomes more expensive because interest rates are up, consumers tend to spend less.

To be clear, the Fed wants that to happen. It's the only way to bridge the gap between supply and demand that's been causing inflation to soar since the latter part of 2021.

But the concern is that consumers could push back in the wake of much higher borrowing costs and cut their spending substantially. If that happens, it could spur a recession and put some people in a position where their jobs and income are compromised.

Interestingly enough, a full-blown recession might do the trick of motivating lawmakers to approve another stimulus round -- something a lot of people have been desperate for this year. But let's remember that stimulus checks really only come into play when economic conditions are poor. And while inflation is making life difficult for a lot of people now, at least the labor market is nice and strong. If the latter situation changes, it could deal a more devastating blow than the one inflation has dealt.